Approval process inches forward on IBM-Lenovo deal

It may not be until the end of 2014 – or even later if the regulatory road gets bumpy – when Lenovo will be able to take over IBM’s low-end server business.

The $2.3 billion deal needs approval by regulators from different countries, and has gotten input from many well-known law firms.

Lenovo CEO Yang Yuanqing recently confirmed he expects the deal should get final approval from regulators this year.

"We are still confident that we can complete the two transactions [Lenovo and Motorola] by the end of this year," Yang said in a public presentation. "We are making very good progress in obtaining approvals for the deals."

The Lenovo deal was first announced in January, and U.S. regulators are still reviewing details.

Among the regulatory hurdles, U.S. officials are concerned that the servers, which are used by the U.S. government, could be abused by hackers from China, according to The Wall Street Journal. IBM's x86 servers are employed in communication networks and in data centers that support computer networks used by the U.S. military, The Journal additionally reported.

But Yang defended Lenovo as far as security issues. "If you look at our history, with domestic and overseas clients, there have never been any issues regarding security," Yang was quoted by The Journal.

One regulatory hurdle was recently achieved when China’s Ministry of Commerce approved the $2.3 billion deal after reviewing monopoly questions. When it came to approval by Chinese regulators, the Hogan Lovells law firm advised IBM on global antitrust issues. Among the firm’s lawyers working on the approval by Chinese regulators were: Janet McDavid, Antitrust, Competition and Economic Regulation co-head, and Logan Breed, Adrian Emch, Ciara Kennedy-Loest, and Rachel Brandenburger. In addition, Cleary Gottlieb Steen & Hamilton and Cravath, Swaine & Moore also worked on the deal.

Looking at the approval process, Douglas Grosfield, president and CEO of Xylotek Solutions, was quoted by CRN that "The bigger question is U.S. regulators. We are anxiously waiting for this deal to be approved."

Under the Lenovo-IBM deal, Lenovo will acquire System x racks and towers, x86 BladeCenter and x86 Flex System blade servers and integrated systems – and related software, switching and maintenance. On the other hand, IBM will still own System z mainframes, Power Systems, Storage, Power-based Flex servers and PureApplication, and PureData Systems. Once the deal is complete, IBM’s X86 officials will move over to Lenovo, according to the two companies.

Lenovo also wants to buy Google's Motorola division. But under the deal Google will retain much of Motorola Mobility’s patent portfolio, InsideCounselreported.

Contributing Author

Ed Silverstein

Ed Silverstein is a veteran writer and editor for magazines, websites and newspapers. A graduate of Harvard's Kennedy School of Government, he has won several...